OSCTY Pty Limited vy UFFORD HOLDINGS Pty Limited SUPREME COURT OF NEW SOUTH WALES — COURT OF APPEAL GLEESON CJ, MAHONEY JA and HANDLEY JA 2 October 1991 [1991] NSWCA 219 Damages — General Principles — contract for sale of hotel — misleading and deceptive conduct. Trade Practices Act - s52, s82 Gates v City Mutual Life Assurance Society Limited (1986) 160 CLR 1, considered. Gould v Vaggelas (1985) 157 CLR 215, considered. Gleeson CJ. This is an appeal from a decision of Mr Justice Brownie who dismissed an action for damages brought by the appellant against the respondents. The action arose out of a transaction of sale and purchase of a hotel in Oxford Street, Sydney known as the Exchange Hotel. The first respondent was the vendor of the hotel and the appellant was the purchaser. The second respondent is a director of the first respondent. Insofar as is relevant for purposes of this appeal the action was based upon an alleged contravention by the respondents of s 52 of the Trade Practices Act. The first respondent was alleged to have engaged in misleading and deceptive conduct in relation to the sale of the hotel and the appellant, the purchaser, claimed damages pursuant to the provisions of s 82 of the Trade Practices Act. It is unnecessary to repeat in detail the facts found by the learned trial judge. They appear in his Honour's reasons for judgment which I take it are available to be read with this judgment. It suffices for present purposes to say that, prior to the formation of the contract for the sale of the hotel, the vendor and its predecessor in title had some dealings with a statutory authority known as the Liquor Administration Board for the purpose of obtaining what was, in effect, an authorisation for use of part of the hotel premises for entertainment purposes. It is unnecessary to go into the detail of the regulatory scheme pursuant to which it was necessary for such authorisation to be sought. As at the time of the contract between the vendor and the purchaser no finality had been reached in relation to the matter but certain events had occurred which, if they had been known to the purchaser, would have given the purchaser some information about likely requirements of the Board. It is important to note that the purchaser, for its part, was aware that in due course the Board would have some requirements relating to refurbishing or upgrading the premises, but the purchaser was unaware of the detail of those requirements. The misleading or deceptive conduct alleged on the part of the purchaser was, in effect, failure to make full and true disclosure to the purchaser, in response to questions that called for such disclosure of the facts thenknown to the vendor about the likely requirements of the Liquor Administration Board. It is to be noted that there was no suggestion that there was any representation by the vendor to the purchaser that the Board had and would for the future have no requirements at all and, as I have already indicated, it was anticipated by the purchaser that the Board would have some requirements. 2 UNREPORTED JUDGMENTS For reasons explained in his judgment, Mr Justice Brownie found that the vendor had engaged in misleading or deceptive conduct in failing to make full disclosure to the purchaser of the kind just mentioned. However, his Honour dismissed the claim for damages upon the ground that the plaintiff had failed to prove the damages which it claimed. I should add that it appears that his Honour put to one side and left unresolved what he also regarded as an issue in the case, that is to say, the question whether there had been any relevant reliance by the plaintiff upon the conduct of the defendant. In relation to the appellant's claim that it suffered damage by reason of the misleading or deceptive conduct of which it complained, it is necessary to bear in mind the following facts. In due course of time the appellant received detailed information from the Board as to the Board's requirements. Additionally the appellant, which had in any event intended to engage in refurbishing of the premises to some extent, thereupon decided to carryout much more extensive refurbishing. The learned trial judge made the following findings of fact which are amply supported by the evidence and most of which has not been called in question in this appeal. First, his Honour found that, at the time the contract of sale was entered into, the appellant understood that there must have been some application made to the Board for authorisation of the kind earlier mentioned and that that application had not been processed. Secondly, the appellant knew of the general policy of the Board to require refurbishment of old hotels such as the one in question, particularly having regard to safety and fire requirements. Thirdly, the appellant knew the Board would require some work to be carried out when the application was processed, although it did not know precisely what that work would be. As I have earlier mentioned, his Honour also found as a fact at the time the contract of sale was entered into the appellant intended, in any event, to carry out refurbishment work although not such extensive work as it later decided to carry out. Although his Honour does not specifically mention the matter in his reasons for judgment there is another fact which was demonstrated by the evidence and which one would have expected to exist in any event as a matter of commonsense. The refurbishment work that was ultimately carried out by the appellant, at least partly inresponse to the requirements of the Board, as they were in due course made known to the appellant, was work which increased the value of the premises. To take one simple example, a substantial and expensive part of the works that were carried out by the appellant involved airconditioning the premises. It is obvious that work of that character would have improved the value of the premises. Against the background the appellant made a claim for damages on a basis which, in my view, was bound to fail. The basis upon which the appellant claimed damages was that it claimed to be entitled to recover the total cost to the appellant of carrying out such of the work of renovation and refurbishment as could be shown to have been made necessary by the requirements of the Liquor Administration Board. A claim propounded in that way was bound to fail because, for a variety of reasons, most of which emerge from the facts as I have just recounted them, the cost of carrying out the work ultimately required by the Board could not be the true measure of the damage which the appellant suffered in consequence of the misleading or deceptive conduct found to have occurred. URJ OSCTY Pty Limited v UFFORD HOLDINGS Pty Limited (Gleeson CJ) 3 The High Court held in Gates v City Mutual Life Assurance Society Limited (1986) 160 CLR page | that, in an action for damages under s 82 of the Trade Practices Act the appropriate measure of damages is the measure in tort. Gibbs CJ said, at pages 6 and 7: Actions based on ss 52 and 53 are analogous to actions in tort and the remedy in damages provided by s 82(1) appears to adopt the measure of damages applicable in an action in tort. That subsection refers to loss or damage by the conduct of another that contravened a provision of Pt IV or Pt V; it therefore looks to the loss or damage flowing from the offending act of the other person. The acts referred to in ss 52 and 53 do not include a breach of a contract, and in awarding damages under s 82 for a breach of either of those sections, no question can arise of damages for loss of a bargain. The contractural measure of damages is therefore inappropriate in such a case. It has been held in the Federal Court in a number of cases that the measure of damages in tort, and not that for breach of contract, will apply in the assessment of damages under s 82 where there has been a contravention of s 52 or s 53: see Brown v Jam Factory Pty Ltd; Mister Figgins v Centrepoint Freeholds Pty Ltd; and Brown v Southport Motors Pty Ltd This view is plainly correct. | have recently discussed the measure of damages in an action for deceit in Gould v Vaggelas. In Gould v Vaggelas (1985) 157 CLR 215 at 220-221, Gibbs CJ points out that the usual rule is that: In an action of deceit a plaintiff is entitled to recover as damages a sum representing the prejudice or disadvantage he has suffered in consequence of his altering his position under the inducement of the fraudulent misrepresentations made by the defendant: Toteff v Antonas. In other words, the general principle is that the plaintiff is to be put, so far as possible, in the position he would have been in if he had not acted on the fraudulent inducement. His Honour went on to quote a passage from the judgment of Jordan CJ in McAllister v Richmond Brewing Company (NSW) Pty Ltd 42 SLR 187 at 192 where his Honoursaid: A tule of practice is, however, now well established that where a person complains that he has been induced by deceit to buy something and pay more for it than it was worth, the amount of damages which he is entitled to recover is restricted, prima facie at any rate, to the amount by which the price which he has paid exceeds the true value of the thing bought at the time when he bought it. Brownie J pointed out that, bearing in mind the fact that at the time the contract was entered into the appellant expected that it would have to carry out some work pursuant to some future requirements of the Board, and that there was no way of comparing the work which it expected to have to carry out with the work it was ultimately required to carry out, and, bearing in mind that it was extremely difficult to distinguish between the work that was carried out pursuant to the requirements of the Board and the work that was originally intended to be carried out in any event (and I, for my part, would add, bearing in mind that the work that was ultimately carried out must have increased the value of the property which the appellant bought) the evidence that was adduced did not enable him to calculate the loss that the appellant suffered in accordance with the principles referred to above. The reason for this, I think, is quite simple. As I have already mentioned, the appellant put its case at the trial upon the basis that the measure of damages to which it was entitled was simply the cost of doing suchwork as was required ultimately by the statutory authority. 4 UNREPORTED JUDGMENTS The evidence that was adduced in support of such an unsustainable claim left the trial judge in the position where he was unable to calculate the damages, if any, to which the appellant was entitled on the basis of the proper principles that were to be applied by him. In particular, there was no evidence from any valuer which would have enabled a comparison to be made along the lines postulated by Gibbs CJ. In my view, no error has been shown in the findings of fact made by Mr Justice Brownie or the reasoning contained in that portion of his judgment dealing with the matter of damages. For those reasons I would propose that the appeal should be dismissed with costs. Mahoney JA. I agree with what has been said by the Chief Justice. The trial judge dealt with the matter upon the basis: The plaintiff fails because it has not established loss or damage "by" the conduct in question within the meaning of s 82(1). The judge explained what he meant by this in the following passage: The difficulty about the plaintiff's case is that, through the knowledge of Francis, the plaintiff appreciated at the time of the exchange of contracts that there must have been some application made to the Board for an authorisation, and that that application had not been processed; it knew of the general policy of the Board to require the refurbishment of old hotels, such as this one, particularly havingregard to fire safety requirements; it knew that the Board would require some work to be carried out as soon as the application for an authorisation was processed; and in any event it intended to carry out some refurbishment work, although not such extensive work as it later decided to carry out. The evidence is not terribly precise, but it seems to be established, with fair clarity, that more likely than not, as soon as an application was made to the council for the carrying out of either work such as Francis anticipated would have been required by the Board, or the more extensive refurbishment and improvement work which the plaintiff later chose to carry out in any event, the council would have required that at least a substantial part of what I have called the council's work be done at the same time. I consider therefore that the cost of carrying out the council's work is not recoverable, as the evidence does not enable one to discriminate between the work which the council would have required, on Francis" anticipation, and the work which it in fact required to be carried out. What is also missing is a sensible basis for finding that the plaintiff suffered some measurable loss or damage in respect of the Board's work. The plaintiff knew that some work would be required by the Board when it contracted to purchase the property, but not precisely what work; and on the evidence it may have cost as much as, or more or less than, the work actually required by the Board. It is clear (e g from the letter of 2 May 1988 from Mr Lippmann, the plaintiff's architect, part of exhibit AB) that the plaintiff chose to make very substantial alterations to the hotel so as to substantially improve it, when confronted with the requirements of the Board and the council. That letter provides as good a method as any in the evidence for apportioning the costs incurred by the plaintiff into different categories, but it does not provide a basis for apportioning the costs between recoverableand non recoverable items.' URJ OSCTY Pty Limited v UFFORD HOLDINGS Pty Limited (Gleeson CJ) 5 What the learned judge meant by his reference to what the plaintiff 'appreciated' at the time when the contract was made was, to put the matter briefly, that the plaintiff knew that it would, after the purchase, be required to do some work, both at the demand of the Board and also at the demand of the City Council. The relevance of this was, I think, that it affected the damages which could be recovered. The concept of damages in tort is restitutionary. In the confines of a case such as the present it can be stated as — the plaintiff is entitled to be put in the position that he would have been in had the deception not occurred. Therefore, in the present case, the learned judge had to look at two things — what the plaintiff would have paid had the deception not occurred, and what the plaintiff, in fact, paid because of the deception. It is the first of these which is in question. I interpolate that this is not a case in which there was any suggestion that what the plaintiff in fact paid constituted a bargain or less than proper value of the property in the sense that it is here relevant, and that therefore it is not necessary to pursue any differences which may exist in principle in the cases as to the proper basis of restitutionary damages in this regard. Therefore, the question which the judge had toconsider, namely, what the plaintiff would have paid had the deception not have occurred, required that the court decide what in fact the plaintiff knew. This is so because what the plaintiff knew would have been a factor. It was, in the context of the present issue, the only relevant fact to be considered which would have affected the price which he would have paid. The more work that was to be done, presumably the less the plaintiff would have been prepared to pay for the property. At least this is so if one puts aside the factors to which the Chief Justice has referred, namely, any increase in the value of the property the result of the work. In the present case, as the learned judge found, what the plaintiff knew, that is, he expected, was that work would have to be done at the behest both of the Board and of the council and, as the learned judge pointed out, it had not been shown that what the plaintiff in fact appreciated as apt to be required to be done, was any different from what in fact was, in the event, required to be done. The result of that was, as the learned judge said, that it had not been shown that there was any damage which had been suffered by the plaintiff in the context of the present case. The judgment on this point was, in my opinion, correct. I agree with the orders proposed. Handley JA. I also agree with the reasons for judgment of the Chief Justice. Gleeson CJ. The order of the Court will be that the appeal is dismissed with costs. Orders accordingly. Counsel for the appellant: W Hodgekiss Solicitors for the appellant: Caruna Kay and Barry Counsel for the respondent: B Coles Solicitors for the respondent: M Roper and Co: Maroubra